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Flat-Panel Blues

?Doesn't anybody around here know how to play this game?? So spoke the immortal Casey Stengel after watching his sad-sack 1962 New York Mets bumble their way to yet another loss during what turned out to be a lackluster 40-120 season.

Yet, it continues to bring out high-end plasma products, most notably four new Elite-brand plasma HDTVs shown in May. Two of them offer full 1920x1080 resolution, albeit at a substantial premium over competitive products from Panasonic and Samsung. And in what must be characterized as a state of complete denial, there will be two new 42-inch XGA (1024x768) plasma sets for 2007, selling for $ $2,700 and $3,200 (MSRPs) respectively.

These products completely ignore the fact that 42-inch XGA plasma is on its way out the door, pushed by 42-inch 1080p LCD HDTVs that are already selling for less than $2,000. And it doesn't help that Panasonic has brought out a 42-inch 1080p plasma for under $2,500 as part of its 2007 lineup.

LG's financial hemorrhaging is directly attributable to playing the “race to the bottom” game. In addition to cutting margins to the bone, according to DisplaySearch, the company had a 36 percent decline in market share for the fourth quarter of 2006, which is the all-important holiday selling season. Samsung SDI saw a 14 percent decline during the same period.

The saving grace for both companies is that they have a plan B, which is their ability to pull the plug entirely on plasma and concentrate on their bread-and-butter business: LCD panel manufacturing. (You can expect that to happen by the end of the decade.)

Unfortunately, Hitachi and Pioneer don't have that option, and must sink or swim in large flat-panel manufacturing with plasma technology – unless executives in each company can be convinced to private-label large LCD panels as a complement to the existing plasma HDTV products.

Sony, which once sourced plasma HDTVs and monitors from former fabber NEC (which sold its fabs to Pioneer), now concentrates on getting LCD panels from its S-LCD partnership with Samsung and from Chinese supplier TPV. That decision looks like pure genius right now. Sony's brand name is still exceptionally strong and has helped the company overcome several missteps in consumer electronics during the past few years.

Panasonic, which is building its sixth plasma assembly line, seems to feel it can stay competitive on volume and pricing, and expects to be rolling out 11 million panels a year by the end of 2008 . The company has taken the lead in annual production from Samsung, and although overall plasma shipments declined in the first quarter of this year, Panasonic still held the lion's share of that business with 31 percent of the market.

So what lies ahead? High manufacturing volume, aggressive pricing, and (perhaps most importantly) distribution channels are driving today's flat-panel HDTV and monitor business. Pricing flat-panel displays at the high end of the market is not wise in this day and age. Three factors — screen size, resolution, and price —essentially fuel plasma (and LCD) sales.

If you can make enough product, you can get it onto store shelves with market-sensitive pricing. LG, Panasonic, and Samsung are in a strong position to do that. Hitachi and Pioneer are not, otherwise, they would also be adding PDP manufacturing capacity.

It may well turn out that a round of consolidation is in order for the plasma business over the next two years, as PDP technology continues to lose ground to LCDs below 50 inches.

Pete Putman is a contributing editor for Pro AV and president of ROAM Consulting, Doylestown, Pa. Especially well known for the product testing and development services he provides to manufacturers of projectors, monitors, integrated TVs, and display interfaces, he has also authored hundreds of technical articles, reviews, and columns for industry trade and consumer magazines over the last two decades. You can reach him at pete@hdtvexpert.com.

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